Estimating Demand for IMF Financing by Low-Income Countries in Response to Shocks

This paper estimates factors affecting demand for Fund financing by Low-Income Countries (LICs) in response to policy and exogenous shocks. Various economic variables including reserve coverage, current account balance to GDP, real GDP growth, macroeconomic stability, and terms of trade shocks are found to be significant determinants of Fund financing. Moreover, global conditions, including changes in real oil and non-oil commodity prices and world trade, are also significant. Therefore, the demand for Fund financing by LICs is likely to be cyclical in response to common shocks with its intensity depending on the severity and persistence of adverse shocks.Access to Fund general resources;Balance of payments need;Compensatory and Contingency Financing Facility;Cooperation with Fund;Economic growth;External shocks;Foreign direct investment;Fund approval;Fund arrangements;Low-income developing countries;Members;Poverty Reduction and Growth Facility;Stand-by arrangement requests;balance of payments, current account balance, current account, terms of trade, commodity prices, debt service, non-oil commodity, non-oil commodity prices, debt service to exports, oil prices, world trade, terms of trade shocks, trade shocks, current account deficit, non-oil commodities, counterfactual simulations, external debt, net present value of debt, black market premium, long-term debt, debt burden, multilateral creditors, short-term debt, debt rescheduling, debt outstanding, external debt service, foreign aid, debt relief, oil imports, oil shock, exogenous shock, global liquidity, per capita income, external borrowing, debt crisis, external financing, current account surplus, external finance, official creditors, trade shock, credit tranche, oil importers, reserve holdings, debt servicing, political economy, investment flows, external shock, exchange rate regime, debt sustainability, government deficit, imf repurchases, current account balances, current account deficits, debt relief initiative, repurchases, export earnings, multilateral debt, public and publicly guaranteed debt, public external debt, import costs, transition economies, external debt sustainability, multilateral agencies, repayment ability, external debt burdens, crisis countries, debt stock, credit tranches, balance of payments crisis, global shocks, public and publicly guaranteed, value of imports, debt servicing capacity, price of imports, trade losses, trade growth, external debt burden, member country, multilateral debt relief, exporting countries, export growth, debt burdens